All About OPTIONS - THREAD

Weeklies are cheaper for a reason, ok to use for momentum scalping but be wary.

Easiest way to make money with options is play the opposite side of huge momentum swings. Something drops 15%, buy longer dated calls 5-10% OTM. Puts for the opposite.

Dump them while they are hot. If something goes up 5% then pulls back, it will need to go up 7% the next time for the option to reach the same price sometimes even in the same day.

Pay attention to IV. An IV drop can cause you to lose many even if the stock moves in your favor.

Poor Man Covered Call and Collars are the 2 best advanced strats in my opinion but everyone’s opinion will differ. PMCC is a great way to use leverage with options.

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TchoupitoulasTiger

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What are your main strategies? Are you long premium or short?

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All About OPTIONS

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Thanks for the thread.
I'm studying the basics of options, but I'll be advanced one day.

Forgot to post another adv strategy I use sometimes is Converting a covered call to a spread. I use this strategy when I think the stock will rebound.

When selling CC's most people's target profit is ~50%, they will BTC the CC when they get there. Instead of closing it out, I will instead buy a call closer to ATM for 50% of what I've sold the CC for. I've now locked in my 50% profit but still also get exposure to the upside as the underlying rebounds. When the stock rebounds, simply close the entire spread. This is basically legging into a debit spread for "free". Once you are in a spread, it's generally a very bad idea to leg out by closing one of the calls, you are better to keep the spread intact.

I'll try to do an example.

MSFT is currently trading at 300
I sell a covered call with a strike of 350 for .50.
MSFT drops to 285, the call I sold is now worth .25, I could BTC for 50% profit. Instead, I buy the call with the strike of 345 for .30. I've still pocketed $20 on my CC and have now legged into a debit spread so if the stock rebounds to 300 or even better splits the strike prices, I can close the entire spread for a much bigger profit. If it continues to drop, I keep the $20 and let the spread expire.

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Dump them while they are hot.

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bingo

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Easiest way to make money with options is play the opposite side of huge momentum swings. Something drops 15%, buy longer dated calls 5-10% OTM. Puts for the opposite

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Do you buy the same day of the momentum swing or wait a few days? Seems like you would still be paying on the inflated volatility for the larger than normal move - whether up or down -- when buying the same day.

Volatility is a real thing and sometimes it can help you out. Two examples.

GME Back in Jan of 2020, Gamestop was making a huge move late in the day. I think it was closing in on $200 at the end of the day. I figured it was crazy reaction so I bot the Feb 60 puts with less than 5 minutes to go.

In the after hours, GME got to $249 and figured - well that was a major screwup. The stock opened higher the next morning, but my puts INCREASED in value due to the higher volatility even though I was further away from the strike price than the prior day. I closed for a small gain.

This is one of those outliers that almost never happens. If you buy to open a call, then your option goes up as the price goes up and if you bto a put then your option should go up in price as the stock price falls.

COUP I tried to get in the Coupa Software weekly 120 & 140 puts yesterday morning. I figured recent tech names like CRM and DOCU didn't fare too well, so it could be an indicator on how COUP might perform post ER. The plan was to get some where hopefully I could make a profit on some before the close and hold just enough so that it wouldn't cost me anything to hold - a free look. Worse case, if there isn't a profit close most and hold a few to see how things play out.

I tried getting some but I didn't want to overpay and the 120 puts tripled in price in half an hour. I took the orders down when I had to leave.

Yep! Sell calls most every week and some monthly.

Writing the Puts to get back in is really a good way to get back in it stock. The wheel is always turning!


I personally don't buy a lot of options. If I do, it's a depressed stock and I buy it far out. That's just my personal preferences.

An example here was this past week, I purchase IVR options for Jan 2023 at the current price.


Intraday swings are fun!

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thatguy777

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I saw the thread title and hoped that it might bring you back. I don’t post here as much either since the other options traders had basically gone away. I was lonely. How’s it goin’, my man?

Yep. The majority of my options activity is on the short side. I screen for situations where the IV percentile is above 50%, or at least historically high. I generally don’t short iron butterflys or straddles, but I do quite a few short iron condors, strangles and occasional jade lizards. Of course, my bread and butter is short puts and short verticals.

Ha. Things are great. Still going hard with trading options, net buyer still. Starting to mix in more strategies though. The last two years have done me very well, hoping to close 2021 out right.

With the amount of time I put into researching stocks, my real job, and family it was too difficult to keep up with the other thread. I am going to try and contribute here as much as possible.

Hope all is well!

Buy VXX puts 60 days out any time it closes up 7% for a day. Back tested returns doing this are phenomenal. Anything 40-60 delta.